NEW YORK – Zoom and Peloton are out. Oil drillers and metal miners are in.
Tech companies that made remote living possible – or even bearable – were the center of the action last year as investors sought companies that were either immune to the economic chaos of the pandemic or potential winners from the disruption caused by lockdowns.
But now, money is flowing into old-fashioned sectors where profits are soaring because of the rebounding economy, which is growing at the fastest rate since the early 1980s.
The “economic reawakening” has been a boon for certain companies, said Jonathan Golub, chief U.S. equity strategist at Credit Suisse. “And those tend to be, it’s very simple, old economy.”
Through the first six months of the year, the S&P 500 was up 14.4%, led by the same energy and financial stocks that limped through last year’s economic collapse. That ranks as the second-best performance for the first half of a year since 1998, during the dot-com boom. On Wednesday, the last day of the second quarter, the S&P 500 inched up 0.1% and closed at a record high of 4,297.50.
The arrival of coronavirus vaccines toward the end of last year allowed investors to shift their focus to the companies considered sleepy counterparts to sexy tech shares, such as oil companies and metal-makers whose fortunes were deeply uncertain at the start of the pandemic.
“Whatever company was almost bankrupt but didn’t quite go bankrupt, those are the stocks that are going to do the best,” said Tony DeSpirito, chief investment officer of U.S. Fundamental Active Equity at BlackRock, explaining why some of the worst-performing stocks from last year are leading the pack in 2021.
Shares of Marathon Oil tumbled 50% last year, as oil prices collapsed and even briefly dropped below zero. The company had to cut production and temporarily axed its dividend to conserve cash as the economy reeled and uncertainty prevailed.
But oil is back above $70 a barrel, and Marathon’s shares have more than doubled this year, making it the biggest gainer in the S&P 500. Two other oil and gas drillers, Occidental Petroleum and Diamondback, are not far behind.
A boom in other commodities is likewise lifting metal-makers and miners to the top of the heap for investors.
Shares of the steelmaker Nucor were down 5.5% last year but are up 80% in 2021 as steel prices have hit record highs. Shares of the copper miner Freeport-McMoRan are up more than 42% as demand for that crucial industrial material has surged.
Of course, even with a strong economy and companies forecasting healthy profits, there are risks.
The coronavirus remains an unpredictable threat, with highly contagious variants continuing to circulate.
And if inflation becomes more than a temporary problem, the Federal Reserve could cut back on some of the supportive policies it has put in place.